U.S. President Barack Obama says Israel must halt its West Bank settlements as part of a broader deal toward Middle East peace.

Speaking at the Oval Office on May 28 alongside visiting Palestinian Authority President Mahmud Abbas, Obama renewed pressure on Israel to move ahead with his Middle East peace initiative. But he rejected a timetable for the creation of a Palestinian state, noting domestic political pressures faced by Israeli Prime Minister Benjamin Netanyahu from his hard-line coalition partners.

Speaking to journalists at the White House after his meeting with Abbas, Obama said he is a strong supporter of a two-state solution that would provide peace and security for both Israelis and Palestinians.

"We are a stalwart ally of Israel, and it is in our interests to assure that Israel is safe and secure,” Obama said. “It is our belief that the best way to achieve that is to create the conditions on the ground and set the stage for a Palestinian state as well."

Toward that goal, Obama said he told Netanyahu earlier this week that Israel must stop all construction and expansion of Jewish settlements on occupied Palestinian territory.

"What I told Prime Minister Netanyahu was that each party has obligations under the ‘road map,’” Obama said. “On the Israeli side those obligations include stopping settlements. They include making sure that there is a viable potential Palestinian state. On the Palestinian side it's going to be important and necessary to continue to take the security steps on the West Bank that President Abbas has already begun to take."

Obama continued: "I also mentioned to President Abbas in a frank exchange that it was very important to continue to make progress in reducing the incitement and anti-Israel sentiments that are sometimes expressed in schools and mosques and in the public square, because all those things are impediments to peace."

For his part, Abbas warned Obama that "time is of the essence" for a two-state solution to the Middle East crisis. Abbas pledged the Palestinian Authority's commitment to all of its obligations under the so-called road map to Middle East peace.

Advance Diplomacy

Obama has vowed an aggressive mediation effort ahead of his visits to Saudi Arabia and Egypt next week on a tour that is expected to include his much-anticipated speech to the Islamic world. As the Middle East tour approaches, the Obama administration has been sparring with Israel over the sensitive issue of Jewish settlement activity on occupied Palestinian land.

On May 27, U.S. Secretary of State Hillary Clinton stressed that Washington wants the expansion of all Jewish settlements to stop.

"Mr. President [Obama] was very clear when [Israeli] Prime Minister Netanyahu was here,” Clinton said. “He wants to see a stop to settlements -- not some settlements, not outposts, not 'natural growth' exceptions. We think it is in the best interests of the effort that we are engaged in that settlement expansion cease."

But Israel on May 28 dismissed the blunt U.S. call. Israeli government spokesman Mark Regev reacted to Clinton's remarks by saying "normal life" will be allowed to continue at existing settlements -- a euphemism for continued construction to accommodate population growth.

"In the peace process, all sides have obligations: Israel, the Palestinians, the Arab states. The best way to move forward is for all sides, in parallel, to implement their obligations,” Regev said.

“For our part, Israel will abide by our commitments not to build new settlements and to take down the unauthorized outposts,” Regev continued. “As to the status of existing settlements, their fate will be determined in final status talks between us and the Palestinians. In the interim, normal life in those communities must continue."

The Palestinian Authority has ruled out restarting peace talks with Israel unless it removes all roadblocks and freezes all settlement activity.

Although the policy differences have exposed a rare U.S.-Israeli rift, analysts say it remains unclear how hard Obama is willing to push Israel to make concessions.

What has emerged about Washington's Middle East policy is that Obama appears to see engagement in Palestinian-Israeli peacemaking as crucial to repairing America's image in the Muslim world -- and in drawing moderate Arab states into a united front against Iran.